Revenue Loss

Businesses Lose Almost $1 Trillion to Occupational Fraud

Occupational fraud—theft, embezzlement, or any use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the organization’s resources and assets—causes 30% of all U.S. business failures.

Many companies might not realize it but a typical business organization loses 5% of its annual revenues to occupational fraud.

When this is applied to the U.S. 2016 GDP of $18.56 trillion, it represents a total of $928 billion lost to theft and misappropriation of monetary or other assets, corruption, and falsified financial reporting.

For its 2016 study of 2,410 occupational fraud cases, the Association of Certified Fraud Examiners (ACFE) reported a median loss of $150,000, with 23% resulting in a loss of at least $1 million.

And the median period of time which elapsed before detection was found to be 18 months.

“Less than half of these affected businesses will ever recover a dime of their losses, with small to medium-sized businesses suffering the greatest damage,” says Patrick Valtin, CEO of HireBox.com.

Part of the problem is that often business owners don’t want to believe they’ve misjudged character when hiring people who turn out to be dishonest. As a result, billions of dollars are invested annually in large insurance policies and the latest internal cyber-security and electronic protection measures—yet the losses due to occupational fraud continue.

HR managers in the current business environment are beginning to realize that they must screen job applicants much more closely for their soft skills—those people skills or personal abilities which enable someone to work effectively and harmoniously with others. Key among these are good verbal and written communication skills, tact and diplomacy, accountability, and honesty.

Screening job applicants by verifying academic credentials, previous employment and personal references, as well as doing criminal background and credit checks, all help to establish a picture of an applicant’s soft skills, particularly honesty. A 2003 study of 2.6 million job applicants showed that 44% lied about prior work experience, 41% lied about their education, and 23% of applicants falsified their credentials or made false claims on their resumes.

“Honesty is going to be, more than ever, the major issue in preselecting applicants,” says Valtin. “In addition to an observable decreased level of morality in the society as a whole, mounting evidence of dishonest applicants lying while job hunting is quite alarming.”

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